WDC · Western Digital Corporation

Western Digital’s Q3 FY2026 results reflect a decisive inflection point following the February 2025 separation of its Flash business into Sandisk Corporation. Revenue surged 45% year-over-year to $3.34 billion, with GAAP diluted EPS soaring 289% to $8.20 — a figure inflated by a $2.7 billion non-cash gain on retained interest in Sandisk, as disclosed in the condensed statements of operations. Excluding that one-time item, non-GAAP EPS of $2.72 still represents robust 97% growth year-over-year, underpinned by gross margin expansion to 50.5% (up 1,040 bps YoY) and operating margin improvement to 38.6%. Management attributes this strength to broad-based demand across AI workloads — specifically citing training, inference, agentic AI, and physical AI — all driving persistent, cost-efficient HDD storage adoption. The company’s commentary emphasizes execution discipline, innovation in high-capacity drives, and deepening engagements with hyperscalers and cloud providers. Forward-looking guidance for Q4 FY2026 — $3.65 billion in revenue (midpoint), 51%–52% non-GAAP gross margin, and $3.25 non-GAAP EPS — implies continued sequential growth and margin resilience. Critically, the 20% dividend increase to $0.15 per share, coupled with $752 million in share repurchases during the quarter, signals confidence in durable free cash flow generation ($978 million in Q3) and a strategic pivot toward shareholder returns now that the Sandisk separation is complete and the balance sheet has been strengthened (cash and equivalents: $2.05 billion; total debt reduced to zero from $4.7 billion pre-separation).